Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

16. Income Taxes


The provision for income taxes on continuing operations for the years ended December 31, 2023 and 2022 is comprised of the following:


 Schedule of Components of Income Tax Expense (Benefit)

    2023     2022  
Federal   $ -     $ -  
State     17       29  
Total current     17       29  
Federal     -       -  
State     -       -  
Total deferred     -       -  
Provision for income taxes   $ 17     $ 29  


The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets. The Company’s recent operating results and projections of future income weighed heavily in the Company’s overall assessment. As a result of this analysis, the Company continues to maintain a full valuation allowance against its federal and state net deferred tax assets at December 31, 2023 as the Company believes that it is more likely than not that these assets will not be realized.


The tax effects of significant items comprising the Company’s deferred tax assets and (liabilities) as of December 31, 2023 and 2022 are as follows:


 Schedule of Deferred Tax Assets and Liabilities

    2023     2022  
Deferred tax assets:                
Federal net operating loss carryforwards   $ 26,429     $ 26,713  
State net operating loss carryforwards     3,780       3,639  
Compensation     2,021       2,059  
Allowances and reserves     421       395  
Intangible assets     3,201       3,584  
State taxes     1,049       987  
Credit carryforward     1       1  
163(j) interest     1,411       1,279  
Deferred revenue     94       94  
Capitalized 174     268       158  
Valuation allowance     (38,654 )     (38,256 )
Gross deferred tax assets     21       653  
Deferred tax liability:                
Property and equipment     (17 )     (650 )




)     (3 )
Deferred tax liability-net valuation allowance   $ -     $ -  



The Company’s deferred tax asset and deferred tax liabilities are included within Other long-term liabilities, within the consolidated balance sheet as of December 31, 2023 and 2022. Federal tax attribute carryforwards at December 31, 2023, consist primarily of approximately $125.8 million of federal net operating losses. In addition, the Company has approximately $60.8 million of state net operating losses carryforwards post 382 ownership change. The utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws. Under current federal income tax law, federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of Federal Taxable Income, and current state net operating losses not utilized begin to expire this year.


The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL, and tax credit carry forwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, as well as similar state tax provisions. The amount of the annual limitation, if any, will be determined based on the value of our company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. Additionally, U.S. tax laws limit the time during which these carry forwards may be applied against future taxes, therefore, we may not be able to take full advantage of these carry forwards for federal income tax purposes. During 2021, the Company completed a 382 assessment of the available NOLs under Section 382 and determined that the Company underwent an ownership change on March 30, 2017 and July 15, 2019 and as a result, NOLs attributable to the pre-ownership change are subject to a substantial annual limitation under Section 382 of the Internal Revenue Code due to the multiple ownership changes. The Company has adjusted their NOL carryforwards to address the impact of the 382 ownership change. Federal Net Operating Losses of $71.2 million are subject to annual limitation for ownership changes and the Company is utilizing $1.0 million during the current year. The remaining $55.6 million of NOLs incurred post July 15, 2019 are not subject to any annual limitation and can be carried forward indefinitely.


A reconciliation of the difference between the federal statutory tax rates and the Company’s effective tax rate from continuing operations is as follows:


 Schedule of Effective Income Tax Rate Reconciliation

    2023     2022  
Federal statutory rate     21.0 %     21.0 %
State income tax rate, net of Federal tax benefit     1.4 %     3.6 %
Meals and entertainment     2.1 %     (0.4 %)
Valuation allowance     (23.0 %)     (24.7 %)
Effective tax rate     1.5 %     (0.5 %)


The following table summarizes the change in uncertain tax benefit reserves for the two years ended December 31, 2023:


 Schedule of Unrecognized Tax Benefits Reserves Roll Forward

    Tax Benefits  
Balance of unrecognized benefits as of January 1, 2022   $       877  
Additions for tax positions of prior years     -  
Balance as of January 1, 2023   $ 877  
Additions for tax positions of prior years     -  
Balance as of December 31, 2023   $ 877  


As of both December 31, 2023 and 2022, the total amount of gross unrecognized tax benefits was $0.9 million. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of both December 31, 2023 and 2022 was $0.9 million.



The Company recognized interest and penalties of $0.2 million related to uncertain tax positions in income tax expense during each of the years ended December 31, 2023 and 2022. At December 31, 2023 and 2022, accrued interest and penalties, net were $4.0 million and $3.8 million, respectively, and are included in the Other long-term liabilities in the consolidated balance sheets.


The Company and its subsidiaries file a U.S. Federal consolidated income tax return and consolidated and separate income tax returns in numerous states and local tax jurisdictions. The following tax years remain subject to examination as of December 31, 2023:


 Schedule of Tax Years Subject to Examination

Jurisdiction   Tax Years
Federal   20192023
State and Local   20182023


To the extent there was a failure to file a tax return in a previous year; the statute of limitation will not begin until the return is filed. There were no examinations in process by the Internal Revenue Service as of December 31, 2023.